Skyworth's Net Profit Dropped By More Than 60percent Year-on-year.

Net profit dropped by more than 60% year-on-year, and Skyworth Digital recently released a profit warning, which will be its worst performance since its listing. The company’s subsidiary Coolo plans to launch an independent listing, and at the same time, betting on new energy vehicles. Under the pressure of results, this established color TV company has started to change frequently.

Loss of performance

The leading color TV brand in China Skyworth Digital suffered the biggest debacle since its listing. According to the announcement, the company’s net profit for the 2017-2018 period fell sharply by more than 60% year-on-year.

Skyworth blamed the decline in net profit on rising panel and chip prices and the appreciation of the renminbi. Since mid-2016, the price increase of LCD panels lasted nearly 12 months, with an average increase of about 30%. Panel modules (including chips) usually accounted for more than 60% of TV production costs. The renminbi appreciated against the US dollar by more than 6% for the entire year of 2017.

However, Skyworth’s biggest competitor, Hisense Electric, despite similar pressure from rising costs, the company's operating profit for 2017 increased by 44% year-on-year, and net profit attributable to shareholders of listed companies increased by more than 5% year-on-year. Another competitor, the TCL Group, also recorded a strong growth of 66%.

At the same time, the departure of core executives also caused the company to have a fault in the management interface. In the first half of 2017, the number of executives in the subsidiary Skyworth Skyworth Co., Ltd. experienced a resignation crisis. The former Chairman Yang Dongwen, the Director Liu Xiaoyu and the Chairman of the Supervisory Board Guo Limin resigned at the same time. Among them, Yang Dongwen was the core figure of the company. Yang Dongwen spent a cumulative 17-year career with Skyworth Group. When Huang Hongsheng, the founder of Skyworth Group, was imprisoned, he took up the responsibility of serving as the CEO of Skyworth Digital Holdings Co., Ltd. and the president of Skyworth Group.

Therefore, Skyworth’s most dismal performance this year is not unrelated to the turbulence of its core executives.

Cool turn

"Today, I officially announced that Coolopen no longer sells TV," said Wang Zhiguo, a subsidiary of Skyworth's sub-brand Coolo, who recently revealed a plan for independent listing. "The business model of the future cannot be made up of TV sets selling more than one hundred thousand bills a year. ”

Cooca was founded in 2006 and then officially separated from the color TV business unit in April 2015; the earliest main Internet TV, but cool open in recent years, in addition to Internet TV, more inclined to smart TV system operating system The business segment actually includes smart TV system operations and related value-added services; Skyworth RGB, an indirect wholly-owned subsidiary of Skyworth, is its largest shareholder.

However, for Coocaa, it is not the first time to abandon the content platform operators of TV hardware to turn to OTT, and there is also a lack of successful cases for reference and reference.

In the development of home Internet, color TV has become the best traffic entry point in this field thanks to its large screen and rich content display. In the past two years, the struggle for television terminals has also become a hot topic in the capital market. Baidu and Tencent have joined shares in Coocaa; Tencent and Jingdong have stakes in TCL's Thunderbird Technologies.

It was millet that started to lay out the indoor operating system earlier in the country. This company, which is about to land in Hong Kong stocks, has established integrated control of mobile phones, TVs, millet boxes, and Xiaomi’s air conditioners and speakers through its MINU system. Public data shows that as of June 2017, Xiaomi's MINU system has 280 million users worldwide.

Cool open system and MINU system do not have much essential difference. Because there is no mobile phone, tablet PC and other services, Skyworth can only cure this system as a TV remote control.

Skyworth, which completely relied on the TV screen and later entered this field, appeared to be very thin on user data. As of the end of March this year, the total number of activated smart TVs was 28.35 million, which is one-tenth of the number of Xiaomi users.

In terms of content, domestic leading TV brands, such as Hisense, TCL, and Konka, have also achieved some form of cooperation with iQiyi, Tencent Video, and QQ Music. In terms of content presentation, there is no surprising innovation. All of them are classified according to movies, TV dramas, games, and e-commerce, but there are differences in names.

"Well, from the consumer's point of view, since the TV and system of others have been changed, they are all watching iQiyi or Tencent video, listening to QQ music, why would you use your brand system and TV?" home appliance industry observers Liu Buchen believes that "In recent years, some Internet TV hardware brands have been invested by content brands, and they seem to be a bit like men and women fall in love. However, I do not think this has much meaning and will not bring about major changes to the Internet brand pattern. ."

According to the "Flat TV Trends Report" published by the Consumer Electronics Survey Office of the China Electronics Chamber of Commerce in 2017, the market share of Internet TV has rapidly dropped from 20% to 10%. Of the total sales of 47.96 million TV sets, Internet TVs such as Xiaomi, Xiaoke, Cool Open, Popular, Storm, and CAN add up to only 4.8 million units. Some industry insiders believe that Internet TV will further shrink in 2018, and the environment will further deteriorate.

Finding new roads

"In the color TV industry, Skyworth is a good company; however, under the backdrop of the entire home appliance industry, Skyworth's business is not large enough and its reliance on color TV is still high." Liu Buchen analyzed that Skyworth's industrial layout is relatively single. This restricts Skyworth's rapid and large-scale implementation. In addition, earlier in the refrigerator and washing machine market, Skyworth is also considering expanding its scale.

Compared with its counterparts Hisense, Changhong, TCL, Skyworth in the past few years in the transformation of the Chinese home appliance industry has actually "slowly beat." The delay in reliance on color TV business revenue, and even the bet OLED TV in color TV business, has caused a serious imbalance in input-output ratio over the past four years, leading to a disproportionate proportion of the entire company's TV screen and high-end structure. In terms of white power business, Skyworth is more typical of “thunder and rain”, and it is still in the industry's third-line camp. It cannot rely on brands, channels, marketing, and other resources on the TV platform to make the system work.

Poor performance forced Skyworth, an established TV maker, to do everything. According to the China Gold Research report, Skyworth currently intends to inject its group's new energy vehicle business, Kaiwo, to boost its performance. This seemingly self-help measure also faces a dilemma: Nanjing Jinlong, which produces electric buses, has not been successful. Due to the subsidy decline, the new energy auto business will face tremendous challenges this year. Due to the need for competition, huge amounts of money are also required to engage in research and development and market development, which increases the risk and uncertainty of profitability in the short term. The domestic new energy vehicle leader BYD's performance in the first quarter of this year dropped sharply by 80% year-on-year.

“If the acquisition is successful, I think we can expand Skyworth’s digital revenue, but it can be increased. It’s not easy to say. I don’t know if it is a capital market fear (KaiWo Motor) is not a good asset. Worries about injection will affect the stock price performance of Skyworth Digital. Liu Buchen believes that most companies have almost no way to completely get rid of the shackles from raw materials, and to find new ways to find other business profit growth points are all issues that companies are considering.